Friday, May 17, 2013

Speech control on campus

Big brother tentacles are everywhere, once you open your eyes.  Outrageous college "speech codes" have been the subject of debate for several years now and in this article one sees why.  If anyone wants to know what has been going on behind the scenes with the Obama administration for the past 4 years  this article is a wakeup call.  When Obama spoke of transforming America while campaigning in '07 and '08, this is one of the many reforms he no doubt had in mind.


Greg Lukianoff: Feds to Students: You Can't Say That

By GREG LUKIANOFF

The scandals roiling Washington over the past two weeks involve troubling government behavior that had been hidden—the IRS targeting of conservative groups and the Justice Department's surveillance of the Associated Press, among others. Largely overlooked amid the histrionics has been a shocker hiding in plain sight. Last week, the Obama administration moved to dramatically undermine students' and faculty rights at colleges across the country.

The new policy was announced in a joint letter from the Education Department and Justice Department to the University of Montana. The May 9 letter addressed the results of a year-long joint investigation by the departments into the school's mishandling of several serious sexual-assault cases. The investigation determined that the university's policies addressing sexual assault failed to comply with Title IV of the Civil Rights Act of 1964 and Title IX of the Education Amendments of 1972.

But the joint letter, which announced a "resolution agreement" with the university, didn't stop there. It then proceeded to rewrite the federal government's rules about sexual harassment and free speech on campus.
If that sounds hyperbolic, consider the letter itself. The first paragraph declares that the Montana findings should serve as a "blueprint for colleges and universities throughout the country." After outlining the specifics of the case, the letter states that only a stunningly broad definition of sexual harassment—"unwelcome conduct of a sexual nature"—will now satisfy federal statutory requirements. This explicitly includes "verbal conduct," otherwise known as speech.
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Corbis

The letter rejects the requirement, established by legal precedent and previous Education Department guidance, that sexual harassment must be "objectively offensive." By eliminating this "reasonable person" standard—which the Education Department has required since at least 2003, and which protects the accused against unreasonable or insincere allegations—the right not to be offended has been enshrined in a federal mandate.
The letter further states that campuses have "an obligation to respond to student-on-student harassment" even when that harassment occurs off-campus. In some circumstances, the letter says, universities may take "disciplinary action against the harasser" even "prior to the completion of the Title IX and Title IV investigation/resolution." In plain English: Students can be punished before they are found guilty of harassment.

Given that the letter represents an interpretation of federal law by major federal agencies, most colleges will regard it as binding. Noncompliance threatens federal funding, including Pell grants and Stafford loans.
The implications for professors and students are enormous. An unsuccessful request for a date, or even assigning a potentially offensive book like "Lolita," could now be construed as harassment. As attorney and civil libertarian Wendy Kaminer commented on The Atlantic's website this week: "The stated goal of this policy is stemming discrimination, but the inevitable result will be advancing it, in the form of content-based prohibitions on speech."
This attack on campus free speech follows the Education Department's directive two years ago requiring every college in the country that receives federal funds to lower the standard of evidence in sexual-harassment cases. The "preponderance of the evidence," the judiciary's lowest standard of proof, became the required standard. (Many institutions had previously used the "clear and convincing" standard.) As former Dean of Harvard CollegeHarry Lewis has noted, the "preponderance of evidence" mandate means "more convictions—of both guilty and innocent individuals," which is a troubling result "in a society that values individual rights."

Last week's letter is part of a decades-long effort by anti-"hate speech" professors, students, activists and administrators to classify any offensive speech as harassment unprotected by the First Amendment. Such speech codes reached their height in the 1980s and 1990s, but they were defeated in federal and state court and came in for public ridicule.


Despite these setbacks, harassment-based speech codes have become the de facto rule. Earlier this year, my organization, the Foundation for Individual Rights in Education, published a study that looked at 409 colleges and found that 62% maintain codes that violate First Amendment standards.

The stifling effect of these codes isn't theoretical. In 2011, the University of Denver suspended a professor and found him guilty of sexual harassment because his class discussion on sexual taboos in American culture (in a graduate-level course) was considered too racy. Last year, Appalachian State University suspended a professor for creating a "hostile environment" after she criticized the university's treatment of sexual-assault cases involving student-athletes and screened a documentary critical of the adult-film industry.
Recent history gives no reason to expect that the government's new directive on "verbal conduct" will remain confined to sexual speech. At Tufts in 2007, a conservative student publication was found guilty of harassment for criticizing Islam. The same happened to a professor at Purdue University at Calumet in 2012, who faced a four-month investigation.

An obsession with political correctness and the expansion of bureaucracy on campus are key factors in the proliferation of such free-speech abuses. But the hidden force that pushes schools to overreact to offensive, or merely dissenting, speech is fear of liability and the federal government. A growing "risk-management" industry—complete with regular conferences, conventions and consultants—has arisen from efforts by university administrators trying to avoid being sued for discrimination or harassment, and to avoid the costly investigations in which the Education Department's Office for Civil Rights specializes.

All of this effort and expense ought to be unnecessary. The Supreme Court already did the work in Davis v. Monroe County Board of Education (1999). Recognizing that workplace standards for harassment were inappropriate for educational institutions, in Davis the court offered a clear, narrow, workable definition of harassment as a targeted pattern of serious and ongoing discriminatory behavior.

Adopting this standard would have solved—and would still solve, if implemented—universities' liability panic, while allowing real harassers to be punished and avoiding serious threats to freedom of speech. But the Education and Justice departments apparently don't want to embrace the Supreme Court's solution. In their letter, they explicitly reject (and misquote) the court's thoughtful analysis inDavis, deeming it inapplicable for the agencies' "purposes of administrative enforcement."

When the Education Department lowered the standard of evidence for harassment accusations in 2011, some college administrators complained, but most meekly accepted the federal mandate. They may be regretting that submission, now that the government is pushing for even lower standards. Unless we decide that college should primarily be a social institution devoted to preventing offense, it is time for universities—as well as state governments, alumni, students, parents, faculty and citizens—to fight back.
Mr. Lukianoff is the author of "Unlearning Liberty: Campus Censorship and the End of American Debate" (Encounter, 2012) and the president of the Foundation for Individual Rights in Education.
A version of this article appeared May 17, 2013, on page A15 in the U.S. edition of The Wall Street Journal, with the headline: Feds to Students: You Can't Say That.

Another hidden scandal

Looking for yet another scandal?  Well here's a beauty!  This one is an  example of how liberals view their relationship to government considering it in effect their very own privately owned business.  This perspective allows someone like Hillary to hire whom she wants, have them do what she wants done including personal services,  and to ignore any government rules and regulations that may proscribe the actives of a  position defined in the law.  Obama's hiring of czars who are essentially his personal consultants neither approved by Congress nor restricted in their duties and actions by any meddlesome or annoying civil service rules and regulations. This is all shameful.  The use of these kinds of "personal" aides to those in power is not only unconstitutional(if not, should be), but illegal and highly destructive to the proper functioning of a representative democracy.  One can only hope that Darrell Issa has this item on his list of outrages that need investigating.


Weiner’s Wife Didn’t Disclose Consulting Work She Did While Serving in State Dept.

The State Department, under Secretary Hillary Rodham Clinton, created an arrangement for her longtime aide and confidante Huma Abedin to work for private clients as a consultant while serving as a top adviser in the department.
Ms. Abedin did not disclose the arrangement — or how much income she earned — on her financial report. It requires officials to make public any significant sources of income. An adviser to Mrs. Clinton, Philippe Reines, said that Ms. Abedin was not obligated to do so.
The disclosure of the agreement that Ms. Abedin made with the State Department comes as her husband, former Representative Anthony D. Weiner, a Democrat, prepares for a mayoral run in New York City. Politico reported the arrangement on Thursday afternoon.
Ms. Abedin declined a request for an interview, but the picture that emerges from interviews and records suggests a situation where the lines were blurred between Ms. Abedin’s work in the high echelons of one of the government’s most sensitive executive departments and her role as a Clinton family insider.
While continuing her work at the State Department, in the latter half of 2012, she also worked for Teneo, a strategic consulting firm, which was founded by Doug Band, a former adviser to President Bill Clinton. Teneo has advised corporate clients like Coca-Cola and MF Global, the collapsed brokerage firm run by Jon S. Corzine, a former governor of New Jersey.
At the same time, Ms. Abedin served as a consultant to the William Jefferson Clinton Foundation and worked in a personal capacity for Mrs. Clinton as she prepared to transition out of her job as secretary of state.
It is not clear what role Mrs. Clinton played in approving the arrangement. Some good-government groups have been critical of such situations, saying public employees’ loyalty should be solely to the public and their government work, rather than private firms and figures.
Ms. Abedin reached her new working arrangement in June 2012, when she returned from maternity leave, quietly leaving her position as deputy chief of staff and becoming a special government employee, which is essentially a consultant. A State Department official said that change freed her from the requirement that she disclose her private earnings for the rest of the year on her financial disclosure forms. Still, during that period, she continued to be identified publicly in news reports as Mrs. Clinton’s deputy chief of staff.
Officials in the State Department and Clinton circles seem especially sensitive about the arrangement, and no one would speak about it on the record. Earlier this month, Mr. Weiner released a copy of the couple’s 2012 tax return showing that they had income of more than $490,000.
But when pressed on the matter, Mr. Weiner declined to discuss what, if any, income Ms. Abedin derived from work done outside the State Department.
An associate of Ms. Abedin’s said on Thursday that the arrangement allowed her to work from her home in New York, rather than at the State Department’s headquarters in Washington, and to spend more time with her child and husband. She earned approximately $135,000 from the department during 2012.
It is not clear how much Ms. Abedin was paid by Mrs. Clinton privately, or from the Clinton Foundation and Teneo. The Clintons have described Ms. Abedin as a surrogate daughter to them.
Ms. Abedin, who is one of Mrs. Clinton’s most trusted advisers, ended her consulting practice in March, when she moved on to become director of Mrs. Clinton’s transition office.
Melanie Sloane, executive director of CREW, an ethics watchdog group, said the arrangement that Ms. Abedin had seemed unusual. “If she was being held out as a deputy chief of staff, it would be highly unusual for her to be a part-time employee or a consultant,” she said. “Being a deputy chief of staff at the State Department is generally considered more than a full-time job.”

Thursday, May 16, 2013

Stockman weighs in on FDR, Nixon, and gold

Unless one reads history through the eyes of an economist, Austrian economist, one is likely to miss the impact of financial and monetary factors on the past and future.  Stockman is an Austrian economist  by inclination if not by a degree, and he provides here a valuable perspective on what happens when politicians begin to muck around with free markets.  Basically you get what  we have now,  a runaway fiat money driven economies that lerch from crises to crises and depend upon some central bankers to decide what works and doesn't.  As we speak the FRB is buying in all the treasury created bonds because private individuals and creditor countries like China, are no longer willing to.  Since the real economy is not willing oracle to put all these paper dollars to work, they are flowing into the stock market and being used to keep the Welfare State afloat.  Now sooner or later this game has to stop.  That day will come when the markets assert themselves and force the governments to retrench, balance their accounts and act like real businesses coin the real world.


FDR: Sowing the Seeds of Chaos

When FDR Got the Gold

The long-lasting imprint from FDR’s famous “Hundred Days” did not stem from the bank holiday, national industrial recovery act, the farm adjustment act, the Tennessee Valley Authority, or the public works administration.
Instead, it is lodged in the footnotes of standard histories; namely, FDR’s April 1933 order confiscating every ounce of gold held by private citizens and businesses throughout the United States. Shortly thereafter he also embraced the Thomas Amendment, giving him open-ended authority to drastically reduce the gold content of the dollar; that is, to trash the nation’s currency.
These actions did not constitute merely a belated burial of the “barbarous relic.” In the larger scheme of monetary history, they marked a crucial tipping point. They initiated a process of monetary deformation that led straight to Nixon’s abomination at Camp David, Greenspan’s panic at the time of the 1998 Long-Term Capital Management crisis, and the final destruction of monetary integrity and financial discipline during the BlackBerry Panic of 2008.
The radical nature of this break with the past is underscored by a singular fact virtually unknown in the present era of inflationary central bank money; namely, that the dollar’s gold content had been set at $20.67 per ounce in 1832 and had never been altered. There had been zero net domestic inflation for a century and the dollar’s gold value in international commerce had never varied except during war.
The Thomas Amendment nullified this rock-solid monetary foundation and instead permitted the president on his own whim to cut the dollar’s gold content by up to 50 percent. So doing, it signaled that money would no longer exist fixed, immutable, and outside the machinations of the state, but would now be an artifact of its whims and expedients.
It was a shocking deviation from FDR’s own repeated campaign pledges to preserve “sound money at all hazards” and contradicted the pro–gold standard views of even his own party’s mainstream. Likewise, the removal of gold from circulation entirely had never before been seriously proposed, not even by William Jennings Bryan, the populist Democrat presidential candidate best known for his “Cross of Gold” speech.
Self-evidently, bank notes and checkbook money had long been a more convenient means of payment than gold coins, but the function of gold was financial discipline, not hand-to-hand circulation. Redeemability of bank notes and deposits gave the people an ultimate check on the monetary depredations of the state and its central banking branch. Indeed, the public’s freedom to dump its everyday money in favor of gold coins and bullion was what kept official currency and bank money honest.
At the time, however, the shell-shocked nation—even the conservative opposition—scarcely understood that the Rubicon had been crossed. The most notable clarion call, in fact, came from Lewis Douglas, FDR’s own budget director and key economic advisor. Hearing on April 18, 1933, of the president’s intention to endorse the Thomas Amendment, Douglas famously declared, “This is the end of western civilization.”
Douglas was at least eighty years premature with respect to timing but his sense of the implication was profoundly correct. In one fell swoop, FDR’s capricious actions launched the Democrats down the road to a government-manufactured currency and a purely national form of money.
It thereby repudiated the internationalist hard-money stand of the 1932 Democratic platform, the pro–gold standard candidacies of Al Smith in 1928, John Davis in 1924, and the James Cox—Franklin Roosevelt ticket of 1920. It also nullified the pro-gold principles of Carter Glass and the Democratic majority that had instituted the Federal Reserve Act in 1913 and the Cleveland, Jackson, and Jefferson Democrats who had gone before.
In short, amid the atmosphere of public fear and alarm from his self-inflicted banking crisis, and owing to his willful insouciance in single-handedly scrapping the nation’s deep and bipartisan gold standard tradition, FDR essentially parted the waters of monetary history. Until June 1933, virtually everyone believed that gold-redeemable money was the foundation of capitalism, yet within months such convictions had gone stone-cold dormant.
It would, of course, take time for the resulting monetary vacuum to be filled by an aggrandizing central bank and a credit-money-based financial system cut loose from the discipline of gold. In the interim, the Great Depression quashed inflationary expectations and speculative instincts for decades to come, and produced a generation of conservative commercial and central bankers who earnestly attempted to replicate its discipline.
Nevertheless, it was only a matter of circumstances before the policy vacuum was filled by less wholesome propensities. Eventually, Nixonian cynicism and Professor Milton Friedman’s alluring but dangerously naïve doctrines of floating exchange rates and the quantity theory of money picked up where FDR left off. Notwithstanding Friedman’s aura of intellectual respectability, Nixon’s crass political maneuvers amounted to a primitive economic nationalism that harkened back to the worst of the disaster that FDR had first sown in the 1930s.

FDR’S London Conference Bombshell: The End of the Liberal International Order

After Roosevelt effectively suspended convertibility in the bastion of the world gold standard, money was essentially nationalized. Most of the world’s major economies, including the United States’s, retreated into separate silos of autarky and stagnation, which in turn bred ultra-nationalism, rearmament, and finally world war. But this outcome was not inevitable.
To be sure, the survival of a liberal international economic order had been in doubt throughout the 1920s, as the world struggled to repair the inflationary mayhem of the Great War and resume convertibility of national currencies. Between 1925 and 1928, huge strides toward normalization of exchange rates, capital markets, and trade were accomplished as England, Belgium, Sweden, and even Japan (1930) restored gold standard money.
But all of this tenuous progress had been seriously jeopardized by England’s abandonment in September 1931 of the very gold exchange standard it had spent a decade promoting under the auspices of the League of Nations. So prospects for resumption of the fabulously stable and prosperous pre-1914 liberal international order were hanging by a thread. In this context, historians are agreed that it was FDR who personally delivered the coup de grâce with his famous “bombshell” message to the London Economic Conference in July 1933.
FDR capriciously defied all of his advisors, to the very last man, including the then-chief of his brain trust, Raymond Moley. Flying by the seat of his own pants, he airily dismissed the warnings of his budget director, the brilliant industrialist and financial scholar Lewis Douglas. He also disregarded the firm pro-gold viewpoint of James Warburg, his most senior financial advisor with Wall Street and international finance experience. Moreover, FDR had failed to even solicit the opinion of Senator Carter Glass. Under the circumstances, that was not merely a telling omission; it was damning.
For the better part of three decades, the legendary Virginia senator, also former secretary of the treasury under Woodrow Wilson and principal author of the Federal Reserve Act, had been the Democratic Party’s paragon of authority on matters of money and banking. Glass had been an unwavering proponent of the gold standard and had personally written the 1932 Democratic platform in such a manner as to leave no doubt that the Democrats would not resort to easy money and inflationist expedients.
For several weeks before his March 4 inauguration, Roosevelt pleaded with Glass to become his secretary of the treasury. Yet hardly sixty days after Glass finally refused the job, FDR did not even bother to consult him when launching what were epochal monetary policy actions. In essence, FDR’s April 1933 gold machinations repudiated the life’s work of the very financial statesman he first picked for the single most important job in his government.
Roosevelt’s flip-flopping on Glass and gold was a defining moment. It showed that on the raging economic crisis of the hour, Roosevelt’s insouciance knew no boundaries; he could believe almost any contradiction that came his way.
It thus happened that after the Hundred Days of emergency actions was completed in late June, FDR headed off to vacation on Vincent Astor’s yacht. He sent Moley as his personal emissary to the London conference, which by then had come to be viewed as literally the last hope for retaining an open international trading and monetary order.
The conference had the good fortune that its presiding officer was Secretary of State Cordell Hull. A former Democratic senator from Tennessee and a splendid statesman, Hull had been a staunch advocate of free trade, the gold standard, and an open international economy.
Most of the assembled financial officials, including Hull, recognized that restoration of some semblance of exchange-rate stability was the key to the rest of the conference agenda, especially to rolling back the protectionist trade barriers which were rapidly choking off world trade. The latter had sprung up everywhere after Smoot-Hawley and were being compounded by beggar-thy-neighbor currency manipulation after the sterling-based gold exchange system broke down.
After long and arduous negotiations, the framework for such a monetary stabilization agreement was reached soon after Moley arrived in London. The US delegation, Great Britain, and the French-led gold bloc nations had all managed to find common ground. While Moley had been a strident voice of nationalistic autarky in the Roosevelt inner circle, even he was persuaded by Hull and the British to endorse the tentative internationalist agreement.
The heart of the plan was repegging the dollar to pound exchange rate in a narrow band about 20 percent below the old parity (i.e., at about $4.00 versus $4.86 per pound sterling). From that pivot point, the French franc and other major currencies would be fixed to the dollar.
The significance of this breakthrough cannot be gainsaid. All sides recognized that floating currencies would poison the international trading system, encourage destructive currency speculation, and fuel violent movements of “hot money” among financial centers. The latter would continuously destabilize both national money markets and confidence in the international trading system as a whole.
In one of the great misfortunes of history, however, FDR was literally incommunicado during the hours when a global consensus to reboot the international financial system briefly flickered. Alone on Astor’s luxurious yacht, the Nourmahal,the president had the advice of only his wealthy dilettante chum Vincent Astor and Louis Howe, his butler and glorified White House “secretary.”
When Moley finally found a navy ship to track down the Nourmahal and deliver a radio message outlining the nascent London agreement, Roosevelt, Howe, Astor, and perhaps also the yacht’s captain, as it were, gathered around a kerosene lamp on the deck. There they scribbled out a handwritten response and turned it over to the navy for radio dispatch back to London.
Roosevelt’s message was undoubtedly among the most intemperate, incoherent, and bombastic communiqués ever publicly issued by a US president. It not only stunned the assembled world leaders gathered in London and killed the monetary stabilization agreement on the spot, but it also locked in a destructive worldwide régime of economic nationalism that eventually led to war.
High tariffs and trade subsidies, state-dominated recovery and rearmament programs, and manipulated fiat currencies became universal after the London conference failed. In the months which followed, Sweden, Holland, and France were driven off the gold standard, leaving international financial markets demoralized and chaotic.
Stockman, David A.
At the end of the day, it was only the outbreak of war in 1939–1940 which pulled the world out of the rut of economic nationalism and stagnation to which FDR’s quixotic action had condemned it. It also meant that the domestic economy had now been cut off from its vital export markets, condemning the nation to a halting recovery and to continuous and mostly ineffectual New Deal doctoring that succeeded primarily in planting the seeds of welfare state expansion and crony capitalism.
Roosevelt’s deplorable action from the deck of the Nourmahal tends to be dismissed by historians as a forgivable bad hair day early in the reign of the economic-savior president. In fact, it was the very opposite: FDR’s single-handed sabotage of the London conference was one bookend of a thirty-eight-year epoch. The other end was bounded by Richard Nixon’s equally impudent destruction of Bretton Woods in August 1971.
In each case the modus operandi was the same. Both Roosevelt and Nixon were aggressive politicians who lacked any enduring convictions about economic policy. Neither had any compunction at all, however, about using the taxing, spending, regulatory, and money-printing powers of the state to achieve their domestic political and electoral objectives. In the great scheme of modern financial history FDR and Tricky Dick were peas in a statist pod.
Copyright © 2013 David Stockman. Used with the author's permission.

David Stockman was director of the Office of Management and Budget under President Ronald Reagan, serving from 1981 until August 1985. He was the youngest cabinet member in the 20th century. See David Stockman's article archives.

What the decrease in the deficit is all about






Keith Hennessey's blog
 

CBO's new deficit estimate

15 May 2013

CBO released their updated economic and budget baseline today, in advance of their estimate of the President’s budget due out later this week. At first the headline sounds like good news: the deficit for this year will be “only” $642 B, 4% of GDP. That’s about $200 B smaller than CBO projected for this year in their January baseline document. Should we celebrate?
No, not unless you like the “fiscal cliff” tax rate increases and you like the government owning Fannie Mae and Freddie Mac. Those are the reasons why the deficit projection declined.
Deficits and Debt
You should know three benchmarks when thinking about federal budget deficits, each measured in % of GDP:
  1. A roughly 3% deficit will hold debt/GDP constant; 
  2. The historic average deficit (pre-2008 crisis) is about 2% of GDP; and 
  3. Of course, a balanced budget is zero deficit. 
Any time you hear a deficit number, compare it to zero, two and three, and you’ll have a good feel for where we are. A 4 percent deficit for this year is not good: it’s almost twice as high as the historic average, and it’s high enough that our debt will continue to increase faster than our economy will grow.
You will hear “But that 4 percent projection is much lower than the 5.4% projected in January. Surely that’s good news. It is certainly an improvement over where we thought we were this year.”
This is where we need to review levels, rates of change, and expectations. This is tricky so I’ll break it down into small steps.
  • The level of our debt/GDP is quite high: 73% at the end of last year. That’s bad, and there’s a debate about just how bad it is. 
  • The deficit is the change in our debt for this year. A deficit means our debt is increasing, and a deficit greater than 3% of GDP means our debt is increasing relative to our economy. So our level is high (bad), and because our 4% deficit is greater than the 3% benchmark, our level is increasing (getting worse). 
  • But it’s getting worse much more slowly than it was getting worse a few years ago. In 2009 the deficit was 10% of GDP. With a 4% deficit this year, our situation (level, debt/GDP) is getting worse much more slowly than it was four years ago. 
  • That does not, of course, mean we’re in a better position (debt level) than four years ago. Our debt/GDP at the end of 2008 was 41%. At the end of last year it was 73%, and CBO projects it will increase to 75% at the end of this year. That our debt is growing much more slowly this year than it was four years ago is hardly cause for celebration. 
  • Looking for a silver lining, our projected deficit (4%) is significantly smaller than was projected just four months ago (5.4%, projected in January). It is therefore a better (less bad, really) number than priorexpectations
I know that’s probably more complicated than you want. Sorry, best I can do.
Why did the projection change so much?
CBO was not particularly surprised by this change. Their estimate changed mostly because they are required to project current law, even when they are pretty sure it will change.
They did their January baseline estimates before tax laws changed on January 2nd, so that baseline does not incorporate the effects of the “fiscal cliff” tax increases. CBO did not change their economic forecast, and other than tiny tweaks to Social Security and Medicare, they didn’t change their spending forecasts much either. Their new deficit estimate for this year came down by $203 B, and $200 B of that is from more money coming into the government:
The payroll tax credit expired;
Tax rates on income, dividends and capital gains all increased for “the rich”;
In anticipation of those rate increases, some individuals realized income in late 2012 rather than 2013, shifting tax collections on that income into this year’s column on the government ledger;
Corporate tax receipts are recovering a bit faster than CBO had previously estimated;
and Fannie Mae and Freddie Mac, now quite profitable, are making big dividend payments to the Treasury. These payments show up on the outlay side of the federal budget ledger, but they are in effect receipts of the U.S. government.
The other big consequence of the nature of these changes is that they are mostly one-time bumps. So the 2013 numbers improved quite a bit, but the numbers for following years don’t increase nearly as much.
Enough already! How should I feel about this?
If you supported the tax rate increases then this is marginally good news. But don’t celebrate; our fiscal picture is still grim.
If, like me, you hate tax rate increases on anyone and detest having the government own two massive mortgage finance companies, then you should feel no comfort from today’s deficit news, which is almost entirely the result of those policies. I’d happily return to a 5.4% deficit if you let me repeal the tax rate increases and replace Fannie & Freddie with a private mortgage securitization market.
And then I’d cut government spending. A lot.
-kbh USA flag

Wednesday, May 15, 2013

Government versus tyranny

This is a useful history of tyranny from National Review,followed by a friendly qualification by Jonah Goldberg.  Both these writers are right.

In Praise of Paranoia
Just because you’re paranoid doesn’t mean they aren’t after you.
By  Charles C. W. Cooke

Tuesday, May 14, 2013

Why the Fed's current policy will fail


For those of us who subscribe to the Austrian School of economics, then current policy of the Federal Reserve is going to create major problems for the economy sooner or later.  The following explanation of why is a chapter out of von Mises's treatise.


Stable Prices, Unstable Markets

According to European Central Bank Governing Council member Ewald Nowotny, Federal Reserve Chairman Ben Bernanke sees no risk of inflation in the United States. According to Nowotny, Bernanke had given a “very optimistic” portrayal of the US outlook.
“They see absolutely no danger of an expansion in inflation,” Nowotny said. Bernanke had said US inflation should be 1.3 percent this year.
Fed forecasts put inflation by the end of this year in a range of 1.3 to 1.7 percent. The yearly rate of growth of the consumer price index (CPI) stood at 1.5 percent in March against 2 percent in February and 2.7 percent in March last year.
Also the growth momentum of the core CPI (the CPI less food and energy) has eased in March from the month before. Year-on-year the rate of growth has softened to 1.9 percent from 2 percent in February and 2.3 percent in March last year.
For Bernanke and most experts, the key factor that sets the foundation for healthy economic fundamentals is a stable price level as depicted by the consumer price index.
According to this way of thinking, a stable price level doesn’t obscure the visibility of the relative changes in the prices of goods and services, but enables businesses to see clearly market signals that are conveyed by the relative changes in the prices of goods and services. Consequently, it is held, this leads to the efficient use of the economy’s scarce resources and hence results in better economic fundamentals.
For instance, let us say that a relative strengthening in people’s demand for potatoes versus tomatoes took place. This relative strengthening, it is held, is going to be depicted by the relative increase in the prices of potatoes versus tomatoes.
Now in a free market, businesses pay attention to consumer wishes as manifested by changes in the relative prices of goods and services. Failing to abide by consumer wishes will lead to the wrong production mix of goods and services and will lead to losses.
Hence in our case businesses, by paying attention to relative changes in prices, are likely to increase the production of potatoes versus tomatoes.
According to this way of thinking, if the price level is not stable, then the visibility of the relative price changes becomes blurred and consequently, businesses cannot ascertain the relative changes in the demand for goods and services and make correct production decisions.
This leads to a misallocation of resources and to the weakening of economic fundamentals. In short, unstable changes in the price level obscure changes in the relative prices of goods and services. Consequently, businesses will find it difficult to recognize a change in relative prices when the price level is unstable.
Based on this way of thinking it is not surprising that the mandate of the central bank is to pursue policies that will bring price stability, i.e., a stable price level.
By means of various quantitative methods, the Fed’s economists have established that at present, policy makers must aim at keeping price inflation at 2 percent. Any significant deviation from this figure constitutes deviation from the growth path of price stability (or at least stability in the rate of price-level increase).
Observe that Fed policy makers are telling us that they have to stabilize the price level in order to allow the efficient functioning of the market economy. Obviously this is a contradiction in terms, since any attempt to manipulate the so-called price level implies interference with markets, and hence leads to false signals as conveyed by changes in relative prices.
By means of setting targets to interest rates and by means of monetary pumping it is not possible to strengthen economic fundamentals, but on the contrary it only makes things much worse. Here is why.

Policy of price stability leads to more instability

Let us say that the so-called price level is starting to exhibit a visible decline in growth momentum. To prevent this decline, the Fed starts to aggressively push money into the banking system.
As a result of this policy, after a time lag the price level has stabilized. Should we regard this as a successful monetary policy action? The answer is categorically no.
Given that monetary pumping sets in motion the diversion of wealth from wealth generating activities to non-wealth generating activities, obviously this leads to the weakening of the wealth generation process and to economic impoverishment.
Note that the economic impoverishment has taken place despite price level stability. Also, note that in order to achieve price stability, the Fed had to allow an increase in the growth momentum of its balance sheet and consequently in the growth momentum of the money supply.
It is the fluctuations in the balance sheet and the subsequent fluctuations in the growth momentum of the money supply that matter here. It is this that sets in motion the menace of the boom-bust cycle, regardless of whether the price level is stable or not.
While increases in the money supply are likely to be revealed in general price increases, this need not always be the case. Prices are determined by both real and monetary factors.
Consequently, it can occur that if the real factors are pulling things in an opposite direction to monetary factors, no visible change in prices might take place.
In other words, while money growth is buoyant, prices might display low increases.
Clearly, if we were to pay attention to the so-called price level, and disregard increases in the money supply, we would reach misleading conclusions regarding the state of the economy.
On this, Rothbard wrote,
“The fact that general prices were more or less stable during the 1920s told most economists that there was no inflationary threat, and therefore the events of the great depression caught them completely unaware” (America’s Great Depression, Mises Institute, 2001 [1963], p. 153).
From 1926 to 1929, the alleged stability of the price level caused most economic experts, including the famous American economist Irving Fisher, to conclude that US economic fundamentals were doing fine and that there was no threat of an economic bust.
The yearly rate of growth of the CPI displayed stability during 1926 to 1929 (see chart). Most experts have ignored the fact that the yearly rate of growth of the US central bank balance sheet jumped to 42 percent by June 1928 from minus 14 percent in February 1927.
The sharp fall in the growth momentum of the Fed’s balance sheet after June 1928 (see chart) set in motion an economic bust and the Great Depression.
At present, the Fed continues to push money aggressively into the banking system with its balance sheet standing at $3.3 trillion at the end of April against $0.9trillion in January 2008. We suggest however that a fall in the growth momentum of AMS since October 2011 raises the likelihood of a bust in the months ahead.
If one adds to all this the possibility that the process of real wealth generation has been badly damaged by the Fed’s loose policies, it shouldn’t surprise us that we could enter a severe slump in the months ahead.

Summary and conclusion

For most economists, the key to healthy economic fundamentals is price stability. A stable price level, it is held, leads to the efficient use of the economy’s scarce resources and hence results in better economic fundamentals. It is not surprising that the mandate of the Federal Reserve is to pursue policies that will generate price stability. We suggest that by means of monetary policies that aim at stabilizing the price level the Fed actually undermines economic fundamentals.

Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. His consulting firm, Applied Austrian School Economics, provides in-depth assessments and reports of financial markets and global economies. See Frank Shostak's article archives.
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Monday, May 13, 2013

The Saul Alinsky legacy

The Alinskyites are in full flower and command at Swarthmore College, one of the country's foremost small liberal arts colleges.  It is worth remembering that Saul Alinsky was the subject of Hillary Clinton's senior theses while she attended Radcliffe.  The ascendency of this movement coincides with the rise of Barak Obama and all the other radicals now running the country.


Swarthmore Spinning Out of Control (With Videos) | National Review Online

What happens when Saul Alinsky goes to college? Intimidation, polarization, and an end to the free inquiry and exchange that are the hallmarks of liberal education. That’s what’s happening at Swarthmore, a prestigious liberal-arts college outside of Philadelphia, where fossil-fuel-divestment activists schooled in techniques of “direct-action protest” have allied with a range of leftist groups to seize control of the college from an administration unwilling to stop them.
Swarthmore is the epicenter of the national campaign to have college endowments sell off stock in fossil-fuel companies. Swarthmore’s activists came up with the divestment idea well before environmentalist Bill McKibben spread it across the country, and the national divestment movement recently convened at Swarthmore to plot strategy. The goal of fossil-fuel divestment is not only to stigmatize America’s energy companies and penalize them with stock sell-offs, but to build a political movement powerful enough to tax conventional energy producers out of existence – all in the name of fighting global warming.
As it’s spread like wildfire across America’s campuses, the divestment movement has allied with anti-capitalists such as Occupy Wall Street, as well as with advocates for “marginalized sexualities” and various other grievance groups. In effect, the campus fossil-fuel-divestment movement has become the beating heart of a newly revitalized campus hard Left.
Swarthmore’s activists signaled a radicalization of their movement on May 4 when they forcibly seized control of an open Board of Managers meeting, issued demands and ejected conservative students, while Swarthmore’s president Rebecca Chopp stood by and did nothing. Video of this ugly incident has been passed around the Internet as if it’s something to brag about.
As this sad tale unfolds, you will see videos, and you will hear President Chopp’s revealing responses to my questions. You will also see Orwellian attempts by Swarthmore’s administration to obfuscate and sanitize news of the accelerating campus meltdown. And you will hear from Swarthmore students who responded to my queries with e-mails detailing their concerns about the state of their school.
The divestment movement’s rise has been Swarthmore’s fall. President Chopp’s continued refusal to rein in demonstrators who hold her school’s traditions of respectful dialogue in open contempt has spawned an increasingly brazen series of protests, each of which has left the campus more chaotic and divided, and conservative students ever-more abandoned by an institution that not only acquiesces in their ostracism but, increasingly, directly facilitates it.
“F*** Your Constructive Dialogue.” That is the headline (no asterisks in the original) of an essay posted last week at a popular Swarthmore leftist website by Kate Aronoff, a leading member of Swarthmore’s pro-divestment group, Mountain Justice, and a national spokesperson for the campus fossil-fuel-divestment movement. In January, Aronoff defended divestment as a tactic in an online opinion piece published by the New York Times. There, like other members of Mountain Justice, Aronoff had little to say about ideology. Her recent, less public piece is more revealing. In it, Aronoff rejects Swarthmore’s classically liberal tradition of civil discourse in favor of a stern and intolerant radicalism.
Tolerance at Swarthmore, says Aronoff, “can only be reactionary, a shield to hide behind when the terms of debate become too threatening.” Students at Swarthmore ought not to tolerate their classmates who choose to go on to work for large Wall Street banks and brokerage houses, for example, or who pursue conventional careers in international relations. Not only Swarthmore’s tradition of tolerance, but the entire “liberal project” must be junked, says Aronoff, in favor of a program of radical “liberation.”
This thinking was on display nine days ago, when about 100 protesters led by Mountain Justice marched into a meeting of Swarthmore’s Board of Managers, surrounded the speakers, and seized control of the room. (See the videohere.) The protesters’ collective statement expressed determination to transform Swarthmore from a liberal institution into one that was “radical and emancipatory.”
The sheer deviousness of the protesters was impressive. Mountain Justice had repeatedly called on Swarthmore’s Board of Managers to set aside their usual practice of private meetings to hold an open forum. Having lured the Board to a public meeting under false pretenses, Mountain Justice sprang their trap and marched in. The Board’s expert on the economics of fossil-fuel divestment managed to get through about a minute of his talk before he was stopped by protesters.
Campus opponents of divestment, led by members of Swarthmore’s Conservative Society, were likewise deceived. Once Mountain Justice commandeered the administration’s microphone, conservatives were told they’d have to wait until all the protesters had made speeches before addressing the Board. When one of the conservatives, Danielle Charette, called for a return to the agreed-upon order, the protesters deployed a carefully rehearsed tactic for silencing opposition – they “clapped her down.”
You can see Charette in this brief but chilling video (wearing green) as she complains that protesters have hijacked the meeting and broken the agreed-upon order of participation. When another conservative student leaps to her defense, the protesters begin to clap in unison at an ever-quickening pace until Charette and her defenders are drowned out. Board members and administrators would have been clapped down as well if they’d had the guts to object the takeover. Then, when an audience member tells the protesters, “You have to stop with these intimidation tactics,” a protester launches into a tirade at the podium.
At this point, Charette calls on the “Quaker moderator” (with white hair), who was supposed to be chairing the meeting, to retake control. When the moderator refuses, Charette turns to President Chopp (in red) to plead for a restoration of order. According to Charette, Chopp then agreed that the takeover was “outrageous,” but shrugged and said there was nothing she could do. (You can see her shrug in the video.) After another fruitless plea for a restoration of order to Dean of Students Elizabeth Braun (off camera), Charette and the other conservatives left the meeting, silenced.
Here, in a two-minute video, is the story of Swarthmore today: feckless administrators abandoning the principles of classic liberalism – and the conservative students those principles protect – to hand the campus over to a bullying minority of leftist protesters. Would that this were an isolated incident.
A bit of background on Mountain Justice will illustrate the larger problem: Swarthmore Mountain Justice members receive training from hardball environmentalist organizers engaged in “direct action” campaigns against Appalachian coal mining. A couple years ago, Swarthmore Mountain Justice led a local bank-lobby takeover, a classic Alinskyite move, until police ordered them out. This year, however, perhaps emboldened by a December 2012 front-pageNew York Times article glamorizing the divestment movement and focusing on Swarthmore, activists from Mountain Justice have turned the college itself into their prime target.
Swarthmore made national news in April when one of the school’s most illustrious alumni, Robert Zoellick, a deputy secretary of state in George W. Bush’s administration, a Bush-nominated World Bank president and U.S. trade representative, and a veteran of private-sector work at Goldman Sachs and Fannie Mae, declined to accept an honorary degree and deliver a commencement speech.
Leftist students had dredged up one bogus reason after another to disinvite him, shifting claims as each successive attack was refuted by Zoellick’s defenders. The real goal, of course, was to deny conservatives legitimacy at Swarthmore. Zoellick’s most prominent critic, Will Lawrence, was the Mountain Justice organizer who’d led that bank-takeover a couple years before.
When rumors that Zoellick’s graduation speech would be hit by protests began to fly, he withdrew, saying he didn’t want to disrupt the ceremony. President Chopp said nothing in defense of Zoellick until after he’d withdrawn. To their credit, Swarthmore’s liberals were mortified by the manifest intolerance of the anti-Zoellick campaign. Mountain Justice and its radical allies, of course, were delighted with their victory, and with so clear an indication that the administration would do nothing to stand in their way. As for conservatives, it was yet another sign that they were unwelcome at Swarthmore.
That message came through again a bit later in April when Bob Weinberg, acting chairman of Swarthmore’s Department of History, writing on behalf of his entire department, endorsed Mountain Justice’s divestment campaign in the Swarthmore Daily Gazette. Weinberg stopped just short of declaring that leftist social activism, as exemplified by fossil-fuel divestment, was the only legitimate outcome of a Swarthmore history education. Yet it’s tough for a reader to draw any other conclusion from the piece, especially since Weinberg made no effort to reassure moderates, libertarians, or conservatives that their views would be respected by the department. A Swarthmore freshman, Nicholas Zahorodny, wrote me that the decision of the history faculty to endorse divestment as a department, rather than as individuals, contributed “to a lock-down of discussion on campus,” intimidating and alienating prospective history majors who may not have supported divestment.
Like many campuses, Swarthmore has institutionalized the pursuit of “sustainability,” a vague term that smuggles a leftist political agenda into the official mission of colleges under the guise of fighting global warming. In the current issue of the Swarthmore College Bulletin, President Chopp offers an openly political interpretation of sustainability, which she argues needs to be incorporated into everyone’s “political practices.” The school’s “Sustainability Action Plan,” “The Greening of Swarthmore,” insists that “radical changes” must come “in all sectors of society” if sustainability is to be properly realized. What happens to free debate when a college lends its official imprimatur to a political program of the Left?
If you’re a stellar student, don’t mind ad hominem attacks, and know how to avoid courses taught by intolerant professors, you just might get along at Swarthmore as a conservative. But even then, you’ll find not a single conservative professors to study with. James Kurth, a social conservative who’s taught foreign and defense policy and has served as a mentor to Swarthmore’s conservatives for decades is now emeritus (although still supervising independent-study courses). Maybe that’s why there are conservative students at Swarthmore who stay “closeted to keep from getting picked on.” So writes openly conservative freshman Savannah Saunders, who adds, “I find it so sad hearing conservatives hide their views out of fear.” Kate Aronoff, of Mountain Justice, notes in the course of her attack on Swarthmore’s tradition of tolerance that conservatives at the school are “ostracized.”
So the ejection of conservatives and the inaction of President Chopp at the board takeover were simply the culmination of a longer history. And in the days since the board takeover, conditions at Swarthmore have deteriorated.
In response to the Board takeover, the administration planned to hold open-ended “community discussions” led by students with contrasting viewpoints, so as not to “exclude or marginalize” any group. That program was quickly dismantled when radicals showed up at a planning meeting, many of them uninvited, to insist on holding “teach-ins” where their demands for transforming Swarthmore would be discussed. Student attendance must be mandatory, said the radicals. Administrators knuckled under without resistance, again leaving conservatives “excluded and marginalized.”
The radicals are demanding a massive expansion of Swarthmore’s politicized “studies” programs, with a new Latino Studies major specifically dedicated to Latinos in the United States, and mandatory classes for all Swarthmore students in ethnic studies and gender and sexuality studies. To further this process of naked political indoctrination, many radicals are calling on Swarthmore to pare back its international-relations courses, which are charged with “reinforcing Western hegemony.” The radicals also want all claims of sexual assault to be made public, thereby naming the accused before a trial even begins.
Think of these proposals as a real-time example of the story laid out by the recentreport on Bowdoin College published by the National Association of Scholars. That report describes a massive expansion of Bowdoin’s politicized “studies” programs at the expense of more traditional courses, which have been turned into isolated islands at the school. At Swarthmore, the remaining traditionalist and non-politicized islands may soon be swallowed up.
At its official website, Swarthmore’s administration played these “teach-ins” as earnest good-faith conversations, rather than what they were: mandatory re-education sessions held at the insistence of the radicals in defiance of the administration’s plans, not to mention the wishes of conservative students. The radicals themselves were furious at the dissembling. They wanted credit for having forced their demands on the school. Swarthmore quickly blocked all comments on the online article describing post-takeover events at the school, an effective way of preventing parents from finding out what was actually happening on campus.
Last week I e-mailed President Chopp a series of questions about the board takeover and subsequent events. (I’ll provide full text of my questions and her replies in a follow-up post.) I asked Chopp why she’d done nothing to restore order during or since the board takeover, and wondered if she was concerned about the effects of her inaction on students who do not share the views of the protesters.
In reply, Chopp invoked Swarthmore’s Quaker tradition of tolerance and insisted that she’s simply been allowing all students to have their say. While she acknowledged that sometimes this approach fails, Chopp expressed faith that tolerant dialogue would eventually be restored at Swarthmore. “We are going to listen and talk to one another, even if it takes many times and many meetings to learn from one another and to decide the way forward,” she said.
This seems to me to be thoroughly wrongheaded. In effect, Chopp’s reply gives Swarthmore’s radicals a green light for further disruptions. She offers no indication of behavioral lines that cannot be crossed, nor any recognition that we are dealing with intimidation by radical students, not dialogue. Chopp seems unable or unwilling to recognize that Swarthmore’s radicals have consistently answered her displays of fecklessness masquerading as tolerance with various iterations of “F*** your constructive dialogue.” She claims to be listening to all voices, when in fact she has collaborated in the forceful silencing of conservative students. She confuses Quaker tolerance and nonviolence with inaction and the surrender of core liberal principle. She has abandoned her students and her school to the tender mercies of an Alinskyite mob. Swarthmore is spinning out of control, and it is Rebecca Chopp’s responsibility to put a stop to it.